Savers were hammered again last night as the interest rate for State savings accounts was cut after lobbying by the greedy banks.

The National Treasury Management Agency confirmed a 1 per cent cut in the rates for State savings accounts for the second time in six months.

Allied Irish Bank, Bank of Ireland and Permanent TSB have urged the Department of Finance and Michael Noonan to cut rates.

They have argued that the higher interest rates created an uneven playing field in attracting deposit flows.

A spokesman for the NTMA defended the move insisting this was open to new claimants only.

He said: “The interest rates on these new issues represents a reduction of between 0.49 per cent and 0.96 per cent on the AER that was available on the previous issue of these products.

“The rate reductions will only affect new purchases that take place after today.

“They have no affect on the existing holders of Savings Bonds, Savings Certificates, Instalment Savings or National Solidarity Bonds, as those interest rates have already been fixed for the duration of their term.

“Any money already placed in previous issues of these products will continue to receive, for their remaining term, the fixed rates applicable to each product on the day that it was purchased.

“The new rates reflect the reductions in interest rates in the savings market and in Sovereign bond yields generally.”

This follows a cut in December of between to 0.35 per cent and 0.95 per cent meaning savers will earn less on the money tucked away.

The State’s saving schemes have long been seen as one of the most lucrative measures because they pay high interest and are tax-free.

The banks had been lobbying the Finance Minister since last year as they struggled to compete.

The institutions, with many of them now state-owed, feel they are at a competitive disadvantage to the tax-free schemes marketed by An Post.

It is also believed the banks may be forced to cut their own interest rates on savings accounts.

Meanwhile, the European Central Bank will decide this week whether to cut interest rates again.

The cut was passed on directly to customers on tracker rate mortgages but banks haven’t made any move on relieving some of the pain of variable rate holders.

They slashed the rate by 0.25 per cent cut last month but the three banks have yet to allow variable rate customers reap the benefits.